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New digital tax proposal will let tech giants off the hook

EU finance ministers failed to agree on a ‘digital services tax’ that would ensure big tech companies pay a minimum level of tax at a meeting today in Brussels. Instead, France and Germany have presented a watered-down new proposal to only tax online advertisements.

“France and Germany’s weak proposal will let most tech giants off the hook. Big digital companies will remain largely untaxed for years to come, while governments try to agree reforms that will bring the tax system into the digital age.

“This is a blow for tax justice. Under current rules, many wealthy tech companies make huge profits, but pay a derisory amount of tax. While corporations enjoy low tax bills, ordinary citizens in Europe and across the world pay the price as essential services like health and education are underfunded. Women and girls are particularly impacted – they shoulder the burden of unpaid care work, and are the first to drop out of education.

“It is essential that EU member states work with other governments – including those in developing countries – to quickly find a global, long-term solution to our outdated tax system that is fit for purpose in a digital age.”

Notes to editors:

Spokespeople are available for interviews and background.

The European Commission had proposed a short-term tax for digital companies, based on their revenue and the location of the companies’ users. It suggested a 3 percent turnover tax for large tech companies with a global turnover of at least €750 million and EU revenues of more than €50 million. The Commission proposal targeted three types of activities: online advertisement, trading platforms and monetizing data.

The new rules were a response to tax avoidance strategies where companies set up headquarters in states with a low corporate income tax, rather than paying tax where they make their profits. They would mainly apply to big tech firms, including the so-called GAFA (Google, Apple, Facebook, Amazon).

Read Oxfam’s analysis of the Commission proposals on the digital services tax in March 2018, with additional background information.

The EU has helped to make progress towards more progressive forms of taxation over the last few years. But member states have consistently failed to agree on the much-needed reforms, such as the proposals to harmonize tax rules across the EU (common consolidated corporate tax base or ‘CCCTB’) or increase tax transparency for multinationals (public country-by-country reporting or ‘public CBCR’).

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